January 2014

Verizon Mobile Profit Under Threat as Price War Escalates

Verizon Communications said it’s studying how to respond to intensifying price competition, potentially leading to moves that may reduce its profit margins.

After reporting a fourth-quarter wireless margin of 47 percent -- up 5.6 percentage points from a year earlier -- Verizon executives said they may make adjustments to contend with the no-contract plans, lower roaming fees and other discounts offered by rivals such as T-Mobile US. “We are prepared to respond where we see a need to respond,” said Fran Shammo, Verizon’s chief financial officer. With its cheaper plans and buyout offers to customers that switch from other carriers, T-Mobile has added more than 2 million monthly subscribers in the past three quarters, compared with Verizon’s 3.4 million. The smaller carrier’s growing influence overshadowed Verizon’s fourth-quarter profit, which beat analysts’ estimates as customers’ wireless bills increased.

Don’t touch my Internet (unless you want a riot)

[Commentary] Increasingly, it appears that Americans are taking the Internet for granted, and that’s a problem. It’s only January, and we’ve already had a federal appeals court strike down the Federal Communications Commission’s network neutrality rules and President Barack Obama placed into the awkward position of having to explain the nation’s rampant National Security Agency spying on both American citizens and overseas allies.

Both of these are significant events that could impact the future of the Internet, but what has been the outcome so far? Sure, there’s been a bit of moral outrage over allegations of NSA abuses, a few op-ed pieces, but mostly a lot of confusion about what things like net neutrality actually mean, and why we should even care. Contrast what’s happening in America with the scene of hundreds of rioting protesters in Turkey, who are literally taking to the streets in Istanbul and Ankara to protest what they perceive as the government’s heavy-handed role in censoring the Internet.

[Basulto works for Bond Strategy; he was the editor of Fortune’s Business Innovation Insider]

Navigant Study Refutes Claims TV Broadcasters Received Free Spectrum

The argument that broadcast television stations received spectrum licenses "for free" is grossly misleading, said a new study by Navigant Economics Managing Director and Principal Jeffrey Eisenach.

The study found nearly all TV station owners paid market value for their spectrum licenses through private transactions, and noted other spectrum holders including wireless carriers and satellite television providers DIRECTV and DISH Network received spectrum licenses without compensating the government. The study found 92% of all full-power television stations as of August 2013 have been bought and sold since receiving their initial licenses from the Federal Communications Commission. The report estimated the cumulative value of transactions involving full-power stations to be over $50 billion, which includes the market value paid for the stations' spectrum licenses. "Broadcasters can hardly be said to be receiving a 'windfall' from their spectrum licenses just because the checks they wrote to pay for those licenses were made out to private companies, rather than to 'Uncle Sam,'" said the study. The study also refuted the notion that television broadcasters are unique in receiving spectrum licenses without direct payment to the government.

The EU Data protection reform: helping businesses thrive in the digital economy

Two years after I first set out the European Commission's [data protection] plans the new rules have still not been adopted. The political parties in the European Parliament have gone forth and found a broad compromise, backing the European Commission's proposals. Member States, however, have been stalling. The goal is to make sure that businesses and national administrations do not collect and use more personal data than they need. Data protection will be the selling point: a competitive advantage. The European concerns have reached the United States. President Obama's speech concerning his "executive Presidential order" on secret services and privacy shows that the awareness in the U.S. that there is a serious problem to tackle seems to go from diplomatic acknowledgement to concrete implementation. Data protection in Europe and the U.S. should be bolstered. Our citizens and businesses deserve nothing less.

[Viviane Reding is Vice-President of the European Commission, EU Justice Commissioner]

Why Verizon is buying Intel Media: it’s all about taking on Comcast

[Commentary] Verizon’s purchase of the Intel Media assets is a fascinating story of a company that was ready to give up on TV -- until it abruptly changed course to turn on one of its former partners and take on one of the biggest players in the industry. The big question now is: How will Verizon use Intel media’s assets?

Verizon and Intel said that “the transaction will accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered “over the top” to any device.” With Intel Media’s OnCue service, Verizon is getting a chance to truly compete with Comcast, if only from a technical perspective. The company could simply transition FiOS TV to a true IP-based platform with an innovative catch-up service that would allow its subscribers to watch anything they have missed in the last three days. Even if that was all that Verizon wanted to do with OnCue, it would still be a good investment. However, pretty much everyone expects Verizon to do more with Intel Media’s assets. An Internet-delivered pay TV service would give the company a chance to finally break free from the chains of its FiOS footprint and market its TV service everywhere. And with Verizon Wireless now even more closely aligned with the rest of its business, it could easily bundle TV with mobile to create its own double- and triple-play offerings. It also could turn cable companies like Comcast into a dumb pipe and offer a competing TV service over their infrastructure.

Netflix goes live on cable box in Sweden, wants to do the same in the US soon

Netflix is now available on yet another device -- but this one is different: The video service launched an app on TiVo boxes leased by the Swedish pay TV operator Com Hem to its subscribers, where results from Netflix’s local catalog are now being displayed alongside live TV programming. This is the second such deal for Netflix, which announced its first operator partnership with Virgin in the UK in 2013.

TWC’s Marcus Stands Firm Amid Bids, Jabs

Time Warner Cable chairman and CEO Rob Marcus has drawn a line in the sand.

As the rhetoric surrounding Charter Communications’ $132.50-per-share bid for Time Warner Cable heated up -- Comcast was approached by Charter to join in the bid -- the new CEO at the No. 2 US cable operator is standing firm. “We were very explicit: We’re not negotiating,” Marcus said. “$160 is what it takes to get anything done. And it’s not just $160. It’s $160 with $100 in cash and a 20% collar. [If] any of those elements are not there, then $160 is not interesting.” Marcus refused to attack his pursuers, but did vehemently defend Time Warner Cable’s strategy, adding that after a two-quarter bump in the road -- during which it lost a total of 519,000 video customers -- a bright light has appeared at the end of the tunnel.

Notable in Their Absence From Davos

The annual parade of boldface names at the World Economic Forum in Davos, Switzerland, is always striking. Attendees at the meeting in 2014, which begins soon, will include Japan’s prime minister, Shinzo Abe; the billionaire Bill Gates; JPMorgan Chase’s chief executive, Jamie Dimon; and the movie star-philanthropist Matt Damon. But just as notable are the luminaries who consistently avoid Davos, despite repeated invitations.

The billionaire Warren Buffett has never attended. Neither has Timothy Cook, chief executive of Apple, the world’s largest company by market value. (His predecessor, Steve Jobs, never went, either.) The founders of Google, Larry Page and Sergey Brin, stopped going a couple of years ago, as did Mark Zuckerberg, Facebook’s chairman. Both companies do send other executives, though. Whatever their reasons for staying away, the leaders of some of the largest and most transformative companies are demonstrating, with their absence, the difficulty of convening a global conversation with all the main stakeholders. Given that one of the themes in 2014 is how to address economic inequality, it would be helpful to have the world’s largest employers participate in that discussion, not to mention a sampling of rank-and-file workers, who never receive an invitation.

Cable and Satellite Pricing Confusion Brings Out the Worst in People

Demonstrating the frustrations some customers feel with their cable and satellite TV service, new research from Marchex highlights that customers are moved to curse more with these operators in call center customer service settings.

Cable and satellite TV operators occupy two of the top three types of firms that engender the most cursing from customers. They are joined in the top three by housing contractors. The cable industry has put forth considerable effort in the past few years to shed itself of their poor customer service perception. Perhaps they can take solace in the fact that customers seem to be more fed up with their satellite competitors, at least as measured by the amount of cursing that goes on. The researchers cite long hold times and pricing frustrations as the main culprits.

New documents: NSA provided 2-3 daily “tips” to FBI for at least 3 years

According to newly-declassified court orders from the Foreign Intelligence Surveillance Court, the National Security Agency (NSA) was (and may still be) tipping off the Federal Bureau of Investigations at least two to three times per day going back at least to 2006.

Hours after President Barack Obama finished his speech on proposed intelligence and surveillance reforms, the Office of the Director of National Intelligence (ODNI) declassified a number of documents from the nation’s most secretive court. The new documents are heavily-redacted orders from the Foreign Intelligence Surveillance Court to the FBI. These items request that the court order an entity (likely a business) to provide “tangible things” under Section 215 of the PATRIOT Act. The documents do not refer to who the target is, nor which company or organization they apply to. The newly-declassified court orders appear to indicate that while the FBI is being granted the order, it is in fact the NSA that is obtaining and analyzing the information first before handing it over to the FBI.

Benton

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